Shanks v Unilever - Supreme Court Concludes An 'Outstanding' Legal Saga On Employee Inventions

On 23 October 2019, Kitchin LJ handed down a judgment, available here, which brought to an end a 13-year long dispute between Professor Ian Shanks OBE FRS FREng and Unilever.

The case concerns a compensation claim made by Professor Shanks, in connection with several patents owned by Unilever directed towards glucose monitoring devices, for which Professor Shanks was the sole inventor (the "Shanks patents"). Professor Shanks considered that his patents were of outstanding benefit to Unilever and, in accordance with Section 40(1) of the UK Patents Act 1977 (PA '77), that compensation was due.

Originally brought to the UKIPO in 2006, Professor Shanks was unsuccessful in his initial case before the hearing officer in 2013 (BL O/259/13). The UKIPO hearing officer decided that while the Shanks patents were clearly of significant benefit, they fell short of meeting the required standard of "outstanding". Professor Shanks was also unsuccessful at subsequent appeals in the High Court ([2014] EWHC 1647 (Pat)) and the Court of Appeal ([2017] EWCA Civ 2). However, the Supreme Court unanimously overturned the decisions of the lower courts, awarding Professor Shanks £2 million as a share of Unilever's benefit, and importantly provided some much-needed guidance as to how this little-used part of UK patent law should be interpreted.

We consider here the reasoning behind the decision, how the Supreme Court considered the issue of what is "outstanding" and the impact this decision might have on other businesses who benefit financially from their patents.

Background

Professor Shanks was employed by Unilever UK Central Resources Ltd ("CRL") from 5 May 1982 to 3 October 1986, primarily developing biosensors for process engineering, and it is agreed that as part of his role he was expected to invent. During the course of his employment, Professor Shanks built a device (albeit at home), designed to measure glucose concentrations in blood, serum or urine.

It is not disputed that the rights to this invention belonged to CRL through his employment, and accordingly, the Shanks patents which resulted from the glucose monitoring device were subsequently filed in the name of CRL, and later assigned to Unilever, as per standard procedure within the Unilever group.

Unilever were not interested in exploiting the patents themselves. Instead, they profited largely from non exclusive licenses of the Shanks patents, which were then subsequently sold to a third party. The UKIPO Hearing Officer found that the net benefit to Unilever of the Shanks patents amounted to ~£24 million.

Legal framework

The Shanks v Unilever case centred about Section 40(1) PA '77, which recites as follows:

"Where it appears to the court or the comptroller on an application made by an employee within the prescribed period that the employee has made an invention belonging to the employer for which a patent has been granted, that the patent is (having regard among other things to the size and nature of the employer's undertaking) of outstanding benefit to the employer and that by reason of those facts it is just that the employee should be awarded compensation to be paid by the employer, the court or the comptroller may award him such compensation of an amount determined under section 41 below." (emphasis added)

Prior to the present judgment, only one major compensation claim has succeeded under S40(1) PA '77 (Kelly and Chiu v GE Healthcare, [2009] EWHC 181 (Pat)). The Kelly case related to a patented...